what is a range of prices for a TPA firm ?

[Guest Happy Actuary]

I know that some people talk about prices in terms of a percentage of annual revenue. What ranges are you seeing for non-producing TPA firms?

[vebaguru]

Everything from low to high.

What is a "non-producing" TPA firm?

[Mike Preston]

The head chicken is no longer capable of laying eggs.

[Guest Happy Actuary]

one that does not sell investments

[david rigby]

Everything from low to high.

Can't argue with that!

How about 1?

[vebaguru]

Having both bought and sold, I will share my thoughts. I have seen sales prices ranging from 60% of annual billings to 200% of billings. Some questions, the answers to which will affect the price, include:

1. Should plan termination fees be included in the valuation?

2. What about new business referrals from existing sources?

3. Will the principals assist with retaining the clientele?

4. Is it an asset sale or the sale of the entity?

5. What indemnities are provided relative to malpractice prior to the sale?

6. Are existing essential personnel staying on, and, if so, for how long?

7. Will payments be cut if the business ends up lower than the amount represented?

8. How large is the down payment?

9. Over what period is the balance payable?

10. Is the business large enough and profitable to sell for a multiple of net profits rather than basing the price on gross revenues?

11. Since many buyers want "non-producing" firms because they consider them to be virgin territory for selling product, what are the primary sources of the business?